<p>
  We conclude that the momentum pattern documented by Gao et al (2017) produces lower returns over our testing period.
  Comparing the strategy to the S&P 500 benchmark, the strategy has a lower Sharpe ratio during the backtesting 
  period and during the recovery from the 2020 stock market crash. However, the strategy greatly outperforms the 
  benchmark during the downfall of the 2020 crash, achieving a 4.8 Sharpe ratio. Throughout all of the time periods 
  we tested, the strategy had a lower annual standard deviation than the benchmark, meaning more consistent returns. 
  A breakdown of the results from all of the testing periods can be seen in the table below.
</p>

<div style="overflow: auto">
<table class="table qc-table">
    <thead>
        <tr>
            <th>Period Name</th>
            <th>Start Date</th>
            <th>End Date</th>
            <th>Strategy</th>
            <th>Sharpe</th>
            <th>ASD</th>
        </tr>
    </thead>
    <tbody>
        <tr>
            <td rowspan="2">Backtest</td>
            <td rowspan="2">1/1/2015</td>
            <td rowspan="2">8/16/2020</td>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_417d176d06ca1509194e3ade608190b6.html">Strategy</a></td>
            <td>-0.764</td>
            <td style="background-color: lightgrey;">0.05</td>
        </tr>
        <tr>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_34ab9a25fa033b66e9465e5e25d2e446.html">Benchmark</a></td>
            <td style="background-color: lightgrey;">0.709</td>
            <td>0.185</td>
        </tr>
        <tr>
            <td rowspan="2">Fall 2015</td>
            <td rowspan="2">8/10/2015</td>
            <td rowspan="2">10/10/2015</td>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_ab959f993d324a3ab3c5f9f3c1a41e2f.html">Strategy</a></td>
            <td style="background-color: lightgrey;">-0.696</td>
            <td style="background-color: lightgrey;">0.058</td>
        </tr>
        <tr>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_19229d5f18c2cc47163a5ff910fb7870.html">Benchmark</a></td>
            <td>-1.243</td>
            <td>0.793</td>
        </tr>
        <tr>
            <td rowspan="2">2020 Crash</td>
            <td rowspan="2">2/19/2020</td>
            <td rowspan="2">3/23/2020</td>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_5bc289c0c4f2fc1a0bc08ad8f96f9595.html">Strategy</a></td>
            <td style="background-color: lightgrey;">4.818</td>
            <td style="background-color: lightgrey;">0.266</td>
        </tr>
        <tr>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_cc2afe14cbcdef1c74d0f3718cac49fc.html">Benchmark</a></td>
            <td>-1.243</td>
            <td>0.793</td>
        </tr>
        <tr>
            <td rowspan="2">2020 Recovery</td>
            <td rowspan="2">3/23/2020</td>
            <td rowspan="2">6/8/2020</td>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_47953c00c8cce7442882e7c64bb9ac23.html">Strategy</a></td>
            <td>0.602</td>
            <td style="background-color: lightgrey;">0.103</td>
        </tr>
        <tr>
            <td><a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_9f37bccb0732468f3f9ed2c09136bee4.html">Benchmark</a></td>
            <td style="background-color: lightgrey;">13.761</td>
            <td>0.386</td>
        </tr>
    </tbody>
</table>  
</div>


<p>
  We find the lack of performance for this strategy is not largely attributed to the inclusion of transaction costs 
  in our analysis while Gao et al (2017) decide to ignore them. Even with ignoring the transaction fees, spread costs,
  and slippage, the strategy still has a lower Sharpe ratio than the S&P 500 and doesn't match the results found in the 
  original research paper. Refer to the   <a href="https://www.quantconnect.com/terminal/processCache?request=embedded_backtest_2ff2604a2ebad4a3df94ca20ae7cfadc.html">backtest results</a>.
</p>

<p>
  Throughout their research paper, Gao et al (2017) provide several suggestions to increase the return generated by 
  this momentum pattern. These areas of future research include:
</p>

<ul>
  <li>
    Trading only on days with economic news events by utilizing the 
    <a href="https://www.quantconnect.com/docs/alternative-data/trading-economics">TradingEconomics</a> data set. 
    Gae et al (2017) suggest using the Michigan Consumer Sentiment Index, and news released on gross domestic 
    product or the consumer price index.
  </li>
  <li>Restricting trading to times of greater volatility or during financial crises.</li>
  <li>Incorporating a volume threshold the morning session must pass to signal a trade for the close.</li>
  <li>Increasing diversification by extending the universe to include ETFs from other sectors.</li>
  <li>
    Considering the return from multiple n-minute periods throughout the day to predict the return of the closing 
    period.
  </li>
</ul>